Judging a Project's Worthiness

Judging a Project's Worthiness

When your buyers love a neighborhood, a home's curb appeal, and the price, but strongly dislike its kitchen, number of bathrooms, or basement, should they purchase it and embark on an overhaul? Or should they keep looking for a more perfect union?

The rules of the remodeling and decorating game are different, given the tougher economy. There’s no guarantee that a costly chef-inspired kitchen, luxurious master bathroom, or landscaped deck will offer the financial payback most home owners historically have come to expect.

The amount of dollars and effort invested now needs to be carefully considered, particularly because of today’s surplus of inventory at reduced prices. Your job is to listen closely to buyers’ priorities, serve as a sounding board, and help them weigh pros and cons.

Sometimes another resource—a design pro—should be called in once buyers have narrowed their choices. Depending on the type of work needed, they may find it helpful to hire an architect, decorator, landscape architect, contractor, or other specialist. Many won’t charge because they hope to win the job if a purchase is made. Architect Michael J. Malone, AIA, of WKMC Architects in Dallas offers his help gratis for an initial meeting and estimate, but charges once plans are requested so work can be bid out to contractors.

Others may bill from the get-go with an hourly rate or flat fee if they think the consultation will entail considerable time. St. Louis designer Caryn Burstein of CLB Interiors charges because she visits possible purchases and asks potential clients to fill out and go over a detailed questionnaire. Kitchen designer Jennifer Gilmer of Jennifer Gilmer Designs in Washington, D.C., also charges because of the time needed to view and measure a space and estimate costs. “Most home owners underestimate labor,” she says.

Below are six questions that design pros recommend asking. Home owners waffling on whether to stay put and make changes or look for another home can use the same analysis:

Who should you call?

Allan J. Grant, AIA, of Grant Architects in Chicago advises calling in an architect when an addition is being considered or major interior work is to be tackled, such as moving walls, stairs, or windows. He and Malone find it useful to have a contractor offer input regarding materials and labor costs for these major undertakings. A designer may be the best person to call if the work is more cosmetic, such as changing wall colors, tiles, or countertops, Grant says. A specialist such as a structural engineer might be best for advice relating to specific problems like a cracked foundation, Malone says. The most reputable design pros will also advise home owners when it’s smart not to proceed, even though that may mean no job. Sometimes, they still get the work. Malone discouraged a couple from adding on to their existing home because he felt it would take 10 years or longer for neighboring houses to play catch up to the home’s increased value. “They loved the neighborhood, and proceeded,” he says. He did the work.

How much will the project cost?

Most pros have done enough projects to estimate the final price tag, based on square footage, materials, appliances, level of finish, custom cabinets or stock, and labor, says architect Stuart Cohen, AIA, with Cohen & Hacker in Evanston, Ill. The best experts also know to tell home buyers to set aside funds for unforeseen problems such as decaying joists, which Gilmer recently found in an old house.

How long will they stay?

The cost of changes becomes more sensible if they’re amortized over a longer time frame, and buyers stay at least five years. One of Burstein’s clients was willing to spend $100,000 but wanted to remain just two to three years. “I advised them that that wasn’t long enough to recoup their money, especially since they weren’t putting it into spaces that appeal to most buyers—a kitchen and master bathroom—but spending on lower-level and third-floor changes. I urged them to ask their salesperson for guidance. They’re now looking for another home,” she says.

Are the costs justified in terms of the area?

Here’s where your expertise as a salesperson knowledgeable about comps is invaluable. Buyers need to know that the improvements they make are warranted for the house because of the value of neighboring homes. Salesperson Jennifer Ames of Coldwell Banker Residential Brokerage in Chicago says she often advises buyers on which enhancements will add the most value because of neighborhood prices. Investments also should be made only when area prices are stable or appreciating, says Cohen.

How much are buyers willing to be inconvenienced?

Camping out and using a makeshift kitchen in a basement is fun only for so long. Buyers should decide how willing they are to be inconvenienced if they plan to stay put during construction, says William Bronchick, a Denver attorney and author of How to Sell a House Fast in a Slow Real Estate Market (Wiley, 2008), who has flipped dozens of homes.

Is the project the best use of funds?

Before buyers proceed, suggest they be honest about whether the changes are where they truly want to invest their funds, or if they’d rather buy the house, avoid changes, and spend discretionary dollars on vacations or squirrel them away for retirement, Bronchick says.